Gillette India - New Engines Could Drive Stronger Growth: Nirmal Bang

Nirmal Bang Report

A combination of-

1. continued healthy growth in female grooming products,

2. recent entry into electric shaving products/trimmers/ epilators,

3. efforts to target influencers and

4. potential premiumisation in toothbrushes could transform the growth prospects of Gillette India Ltd.

Our channel checks and customer surveys indicate healthy traction and brand recall in female grooming sub-segment.

Our current estimates do not assume potential for double-digit sales growth if these new engines start firing simultaneously. Yet, price/earnings multiple is inexpensive at ~37 times FY25E earnings per share (June year ending).

Financials and valuation

Our current estimates build in revenue compound annual growth rate of ~7.2% over FY23-FY25E - in line with the sales CAGR of the preceding five years. These numbers could move to double digits if the company’s recent initiatives, as discussed earlier, are successful.

Our forecasts assume that as the decline in material costs continues, gross margin and Ebitda margin can revert to earlier levels.

One year forward P/E multiple is near the lowest that the company has traded in its history post 30% plus decline in the stock price from its peak seen two years back. Return ratios are healthy, with return on capital employed of over 40%.

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